Evaluation of the Kenya commodity import program (CIP)

Midterm external evaluation covers the period 9/84-1/87 and is based on site visits, document review, and interviews with USAID/K, GOK, bank, and private sector personnel. Although the CIP did not become operational until 8/85 due to expected GOK delays in meeting conditions precedent and certain covenants, the program is now progressing steadily, with $777,327 of FY84 funds disbursed as of 1/87. Conditions precedent for FY85 have not yet been met, but a resolution is expected very soon. While the pace of the program has been too slow to accomplish macroeconomic objectives, the projections made during CIP design were unrealistic. Demand for U.S. products is fully adequate and at expected levels. With the current application rate of $1-$1.3 million per month, and the possibility of increases, FY84/85 funds should be fully committed by early in 1988. Firms participating in the CIP are pleased with the program and report positive effects of CIP commodities on employment, sales, and productivity. However, about half the firms interviewed reported difficulty in obtaining bank credit to participate in the CIP, a situation that might be rectified by using the local currency-programmed Credit Guarantee Programme to make credit available to clients who would otherwise be unable to use the program. Another obstacle to CIP success is that its procedures and benefits are not well understood by many Kenyan importers. Five banks are actively participating in the CIP, but to widely varying degrees, possibily because of differences in bank clientele and in staff ability to explain the CIP to prospective clients. Two other banks have very low participation; one, perhaps both, should be dropped and their funds reallocated to more active institutions. At present, however, there is little incentive for the banks to aggressively market the CIP since their only income is from letter of credit opening fees. New and better financial incentives for the banks may be needed. Management and monitoring of the CIP have generally been excellent. If progress is also being made with regard to policy reform, it is recommended that the CIP be continued in FY88 and after at about $15 million annually. While the decision to continue the CIP should take account a recommended study of the CIP's development and beneficiary impact, it is important to preclude or at least minimize any gap in the availability of funds.